The improvement in lending was driven by high loan-to-value borrowers and first-time buyers.

Lending to borrowers with a deposit of less than 15 per cent increased by 30 per cent between December and January, reflecting a significant improvement in the availability and affordability of first-time buyer loans.

One in eight of all house purchase loans in January went to high LTV borrowers, the largest proportion since February last year, when first-time buyer numbers were artificially high thanks to the rush to beat the stamp duty deadline.

There were 7,758 loans to borrowers with a deposit of 15 per cent or lower in January - the highest since February 2008.

Lending to high LTV borrowers has been on a broadly upward trajectory since 2011. Throughout 2011, there was an average of just 4,808 high LTV mortgages taken out each month.

Mortgages: January saw a spike in lending to borrowers according to e.surv

In 2012, that increased 13 per cent
to 5,325. And January saw an even greater rise of 30 per cent,
suggesting this year could see further improvements in conditions for
first-time buyers.

Richard
Sexton, business development director of e.surv chartered surveyors,
said: ‘These are the most encouraging signs for the mortgage market
since the financial crisis. After an inauspicious start last autumn,
Funding for Lending has come good.

‘It
has flooded lenders’ balance sheets with cheaper funds, which has
encouraged them to reduce mortgage rates to record lows and roll out a
much wider range of mortgages for high LTV borrowers. It is helping
clear the logjam in the first-time buyer market.’

Funding for Lending results in cheapest ever mortgage deals

MORTGAGE RATES FALLING

Latest data from the Bank of England encouragingly show a
further fall in fixed mortgage lending rates.

The monthly interest rate charged on a two-year fixed rate
mortgage with a 75 per cent LTV fell to 3.10 per cent in January from 3.35 per
cent in December and 3.69 per cent in August 2013, when the Funding for Lending
Scheme was launched.

For a five-year (75 per cent LTV) fixed rate mortgage the
monthly interest rate fell to 3.76 per cent in January from 3.89 per cent in
December and 4.11 per cent in August.

The further fall in fixed mortgage interest rates in January
is obviously supportive for the housing market increases the chances that 2013
will be a slightly better year for the housing market.

For the time being, we are retaining the view that house
prices will be essentially flat over the 2013 – given the current uncertain and
limited economic outlook. However, we acknowledge that the risks to our
forecast that house prices will be flat overall in 2013 may be starting to move
to the upside from the downside.

Falling rates and a wider range of mortgages for first-time buyers were the catalyst for the improvement in January.

Over the winter, a number of major lenders launched their cheapest ever fixed rate mortgages.

This has quashed mortgages rates on two-year fixed deals down from 4.44 per cent to 3.92 per cent.

The cheaper funds delivered to lenders’ balance sheets by the Government’s Funding for Lending Scheme was the root cause of the improvement in lending conditions.

Since the scheme launched, lenders have introduced more than 300 new house purchase mortgages.

The improvement in first-time buyer numbers is reflected in a sharp increase in the number of purchase loans on cheapest properties.

There were 14,995 loans on properties worth less than £125,000 in January (a typical first-time buyer property), the highest since February 2008, and a 28 per cent increase from 11,714 in December.

The number of loans on more expensive property increased at a much slower rate, illustrating how the improvement in lending in January was focused mainly on first-time buyers.

Richard Sexton added: 'The hope now is that January isn’t just a flash in the pan. There are plenty of reasons to believe it won’t be. Funding is cheaper. Borrower finances are better. And the eurozone crisis lies dormant.

'All of this bodes well for the rest of the year. Lenders are more confident, and have been emboldened by Funding for Lending and by the relaxation of the speed at which they have to construct capital buffers.'